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Microsoft posted higher than expected quarterly earnings on Wednesday, as its cloud division reported robust sales growth on strong demand from artificial intelligence-related services, calming fears of a slowdown.
Revenue rose 13 per cent within the quarter to the top of March from the identical period within the previous yr to $70.1bn. Net income increased 18 per cent to $25.8bn. Each figures exceeded the common estimate in an S&P Visible Alpha survey.
Microsoft shares jumped as much as 9 per cent in after-hours trading in Recent York, adding about $260bn in market value. The shares had fallen by 6 per cent because the end of 2024 as investors weighed the impact of US President Donald Trump’s tariffs on global supply chains and American economic growth.
Revenue from cloud computing services rose 20 per cent from a yr ago to $42.4bn, broadly according to expectations. The unit that houses its Azure cloud platform had missed expectations within the previous quarter, causing the shares to dump.
“The foremost focus was on Azure growth” that “significantly beat muted expectations”, said Barclays analyst Raimo Lenschow. “The large improvement in AI contribution shows the high potential for AI once [more] capability becomes available.”
Microsoft’s capital expenditure — spending on equipment and other major investments — was $21.4bn within the quarter, up from $14bn in the identical period a yr earlier.
Chief executive Satya Nadella told investors on Wednesday that reports that it had cancelled commitments for brand spanking new US data centre leases weren’t evidence that it had pulled back on spending in response to softening AI demand. Nadella identified that Microsoft opened data centres in 10 countries in its most up-to-date quarter.
“I feel very, excellent in regards to the pace” of expansion, Nadella said, adding that among the cancellations were to make sure that the corporate was not caught “the other way up” by overbuilding in a single area of the world as demand increased elsewhere.
In an interview with the Financial Times this week, Microsoft president Brad Smith pledged to spend “tens of billions of dollars” a yr on European data centres to guard customers’ access to their data and computing power. The move is meant to reassure the region that Trump is not going to give you the chance to chop off access to the critical technology.
Amy Hood, Microsoft’s chief financial officer, reiterated her forecast for $80bn in capex for the total yr ending June 30. She noted it might increase next yr, but at a lower rate than 2025. Hood added that data centre demand continued to outstrip supply.
Big Tech peers Google and Meta have similarly stood by or increased their spending plans within the face of investor scepticism and a deteriorating economic outlook. On Wednesday, Meta said it could spend as much as $72bn on capex this yr, up from a previous forecast for $65bn, because it seeks to grow to be a frontrunner in AI and as infrastructure hardware gets costlier.
Yet the software giant’s evolving relationship with start-up OpenAI, which it has backed with $13bn in investment, has raised doubts about whether it is going to adjust its pace of development.
Microsoft in January said it might change the structure of its take care of OpenAI to enable the corporate led by Sam Altman to make use of rivals’ cloud computing services. It retains right of first refusal.
The move coincided with the start-up announcing with cloud provider Oracle and Japan’s SoftBank that it might construct no less than $100bn of AI infrastructure within the US in a project dubbed Stargate.
Microsoft still retains a sizeable financial interest in OpenAI and is in talks to convert a share of future profits into equity.
